St.George Brokers - Family Pledge Home Loan Option

Family Pledge Home Loan Option

Product Description

The Family Pledge option allows family members (the term ‘family member” refers to parents, grandparents and siblings) with equity in their own property, to help customers bridge the deposit gap and cover up front borrowing expenses, by providing a limited guarantee in support of our customer’s loan application. Our customers will be able to maximise the amount they can borrow against their own security, i.e. the purchase property, with this additional limited guarantee from a family member. The guarantee is to be supported by a registered first mortgage over the family member's property or a registered second mortgage.

Key Benefits / Target Market

The St.George Family Pledge option is being introduced specifically for customers who can utilise the assistance of family members to maximise the amount they can borrow against their purchase property.

This feature attracts a new group of customers to St.George and further widens our ability to meet a variety of customer's needs. It is targeted at both homebuyers and investors that have good ability to repay but lack the sufficient equity to secure the additional funds they need to meet up front loan costs and expenses associated with the purchase of their home or investment property.

Key benefits are:

The benefits for the borrower are:

Allows them to maximize the amount they can borrow – up to 100% of the purchase price, plus costs such as Stamp Duty and Legal Fees. The consolidation of small personal debts may be considered as an exception to policy – see the Product Specifications.
Helps to reduce or avoid LMI premium.

The benefits for the guarantor are:

It will allow the guarantor to nominate a specific amount the guarantee is limited to, rather than a traditional “open” guarantee for the entire loan amount.
The guarantor can ask us to release the guarantee at any time (standard credit policy in regard to LVR's apply).

Example: a customer wishing to purchase a $300,000 property and borrow $285,000 would have an LVR of 95%, which would incur an LMI premium.

If a family pledge guarantee of $60,000 was added as additional security, the LVR would reduce to 79%.

The LMI premium would not be payable, saving the customer up to $5,800.

Availability

The Family Pledge option is available on the following Home Loan products:

1 Year Introductory Fixed Rate home loan
Discount Variable Rate home loan
Standard Variable Rate home loan
Advantage Package – NOT PORTFOLIO
Fixed Rate home loans
Basic Home Loan
No Deposit Home Loan

It is not available on any other loan type.

Existing loans - Family Pledge is not available for existing loans.

Fees

Fees are subject to change – Refer to “ Loan Accounts Charges for specific services and accounts” for current fees and charges.

There are no extra fees for the Family Pledge Option.

The standard guarantee and legal fees will apply.

“Pledged” Security

Only one property can be used as the pledged security but that property can be used for more than one loan.

As an example, parents with two children can use their property on both of their children's loans.

Process

The normal Home Loan approval process will continue to be followed for these loans.

All new loans requiring this feature are to be written on native LIS until further notice.

Releasing the guarantee

The Bank will agree to release of the limited supported guarantee (and related Mortgage) when:

The LVR, based on the Security Value of the borrower's property and Total Security Exposure (TSE) does not require LMI (in terms of the prevailing policy at the time of the request). An updated valuation is required to determine the Security Value.
If LMI is still required, the borrower does have the option of paying the LMI premium based on the current LVR.
Standard Partial Discharge fees apply

The guarantee can be released at the borrower's or guarantor's request. The borrower or guarantor may request a revaluation of the borrower's property at any time, subject to the payment of the requisite valuation fee. Providing the LVR is under the LMI threshold or the LMI premium is paid, the guarantee and the mortgage that supports it will be released.

NOTE: The release of the security property will not be an event which is initiated by the bank, or which occurs automatically or at a predefined time during the loan term. It will occur at the borrower's or guarantor's request, and will be subject to the bank's consent at that time.

Family Pledge Calculation

To calculate the amount of Pledge required covering LMI

For a residential property home loan, divide loan amount by the resultant LVR, say 80%, and subtract loan amount required
For rural property home loan, divide the loan amount by the resultant LVR, say 70%, and subtract loan amount required

For Example:

Generic Example:

Family Pledge option
Security	Security Value (SV)
Loan required	$500,000
Total Security Value required (Loan divided by required LVR) E.g. $500k/80% = $625,000	$625,000
LESS: Purchase price or Valuation, whichever is the lesser	$500,000
EQUALS: Limited Guarantee amount required from family member - supported by mortgage from guarantors over acceptable security	$125,000
LVR (loan amount / total security value)	80%
Note: The LVR policy for each residential security property type will determine if LMI is required. The security value of the supporting security is to be equal to, or greater than, the amount of the guarantee.

Actual scenario:

Family Pledge option
Security	Security Value (SV)
Loan required	$310,000
Total Security Value required (loan divided by required LVR) E.g. $310k/80% = $387,500	$387,500
LESS: Purchase price or Valuation, whichever is the lesser	($295,000)
EQUALS: Limited Guarantee amount required from family member - supported by mortgage from guarantors over acceptable security	$92,500
LVR (loan amount / total security value)	80%
Note: The LVR policy for each residential security property type will determine if LMI is required. The security value of the supporting security is to be equal to, or greater than, the amount of the guarantee.

© St.George Bank Limited ABN 92 055 513 070 AFS Licence No. 240997
St.George is the product issuer of the deposit and payment products referred to on this website. Any advice on this website is prepared without consideration of your personal objectives, financial situation or needs. Before acting on the advice, you should consider if it is appropriate to your objectives, financial situation or needs. You can obtain a Product Disclosure Statement (PDS) for the deposit, payment, insurance and wealth management products referred to on this website by phoning 13 33 30. Please consider the PDS for a product before you decide whether to acquire or continue holding the product. Information current as at date of posting. Applications for credit are subject to the Bank's prevailing lending criteria. Terms and conditions apply to the products mentioned.

The taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and their interpretation. Your individual situation may differ and you should seek independent professional tax advice on any taxation matters.